THE TRIBUNE'S VIEW

HENRY J. WATERS III

Saturday

May 31, 2008 at 12:01 AM

The Missouri Higher Education Loan Authority, caught in the squeeze affecting all student loan agencies in the nation, has in the past few months taken steps in reaction. Earlier it announced postponement of a scheduled payment to the state of Missouri under the plan to divert MOHELA assets into capital funds for college campuses. This week it said it no longer would offer former interest rate breaks to student borrowers.

These are policies similar to those at other student loan agencies, but the lingering controversy over the so-called Lewis and Clark Discovery Initiative - the capital fund diversion plan touted by Gov. Matt Blunt as one of his signature achievements - gives political opponents such as gubernatorial candidate Attorney General Jay Nixon repeated opportunities for criticism.

Nixon and other Democrats say if $350 million had not been diverted from MOHELA reserves, the agency would be better situated to weather current economic difficulties. This week Nixon said it was obvious students would end up paying the price, "and now they are."

One can make a lucid argument against the original cash diversion plan, but this is not it. If MOHELA still had its $350 million, it is not at all sure it would have deviated from student loan policies generally adopted all over the nation. Prudent managers might have decided not to deplete resources in a temporary move to keep interest rates artificially lower somewhat longer for certain student borrowers. Would even the former MOHELA board have done any such thing? Chances are it would have adopted policies mirroring national norms reflecting today's more stringent market conditions just as the current board has done. Clearly, this is the fiscally prudent thing to do.

And the connection between the Lewis and Clark initiative and the inability of MOHELA to make a scheduled payment from those funds is nonexistent. The plan itself is not the reason funds can't be transferred. That unexpected market restraints interrupt the payment schedule is no reason to second-guess the original idea. After all, without it no installment schedule would have existed to be interrupted.

If credit markets had not taken a dive, the Lewis and Clark diversion would have proceeded as expected. Critics still would have reasonable points to make, but they can't fairly seize on today's MOHELA fiscal policies. Even if yesterday's MOHELA reserves were intact and today's critics were on the agency board but with no political ax to grind, I'm guessing they would be making the same policy decisions based on the same marketplace arguments as today's loan agency officials.

Henry J. Waters III, Publisher, Columbia Daily Tribune

It is well, when judging friends, to remember that they are judging you with the same godlike and superior impartiality.

- Arnold Bennett

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